Oasis Midstream Partners LP Announces Year Ended December 31, 2018 Earnings

HOUSTON, Feb. 26, 2019 /PRNewswire/ -- Oasis Midstream Partners LP OMP (the "Partnership" or "OMP") today announced financial results for the quarter and year ended December 31, 2018 and updated its 2019 outlook.

Recent Highlights:

  • Declared the quarterly cash distribution for the fourth quarter of 2018 of $0.45 per unit, an approximate 5% increase from the cash distribution declared for the third quarter of 2018 and in line with the Partnership's 20% annualized distribution growth target.
  • Net income was $146.4 million and net cash provided by operating activities was $205.0 million for the year ended December 31, 2018. Net income was $38.6 million and net cash provided by operating activities was $48.1 million for the quarter ended December 31, 2018.
  • Adjusted EBITDA was $48.6 million and net Adjusted EBITDA attributable to the Partnership was $22.1 million for the quarter ended December 31, 2018. Adjusted EBITDA is a non-GAAP financial measure. See "Non-GAAP Financial Measures" below.
  • Distributable Cash Flow ("DCF") was $18.5 million for the quarter ended December 31, 2018, resulting in fourth quarter DCF coverage of 1.21x. Pro forma for OMP's acquisition of additional ownership interests in Bobcat DevCo LLC ("Bobcat DevCo") and Beartooth DevCo LLC ("Beartooth DevCo"), including a full quarter of cash interest on new debt associated with the dropdown acquisition, DCF coverage approximated 1.43x for the fourth quarter. DCF is a non-GAAP financial measure. See "Non-GAAP Financial Measures" below.
  • Successfully commenced operations at OMP's new 200 MMscfpd natural gas processing plant in Wild Basin ("Gas Plant II") in early December, and began servicing third party natural gas volumes during the fourth quarter of 2018.
  • Completed the acquisition from Oasis Petroleum of an additional 15% ownership interest in Bobcat DevCo and an additional 30% ownership interest in Beartooth DevCo for total consideration of approximately $251.4 million, consisting of $172.4 million in cash and $79.0 million in common units.
  • During the year ended 2018, OMP successfully signed multiple third party agreements across all three development companies and has commenced services pursuant to these arrangements to provide its full suite of midstream services for third party volumes.
  • Increased water volumes in Beartooth DevCo to 151.1 thousand barrels of water per day ("Mbwpd"), a 53% increase compared to the fourth quarter of 2017. Approximately two-thirds of the increase was related to Oasis Petroleum's produced water growth and approximately one-third was associated with increased freshwater volumes, which was largely driven by third party sales.

"Fourth quarter results mark a strong end to an impressive year at Oasis Midstream Partners," said Taylor Reid, Chief Executive Officer of OMP. "During the quarter, we successfully started our new 200 MMscfpd gas plant and executed additional third-party deals in Wild Basin. Fourth quarter pro forma coverage of 1.43x exceeded our expectations. Additionally, OMP successfully completed its first drop as a public company, improving our scale, liquidity, and financial outlook. As we look to 2019, our sponsor's Wild Basin centered program insulates OMP's financial profile, and we are in a position to deliver our EBITDA, growth, and coverage outlook despite the decline in commodity prices. OMP exceeded expectations in 2018, and we look forward to executing our business and continuing to increase the value of our partners' investment in 2019 and beyond."

Gas Plant II Update:

OMP finished construction on Gas Plant II and began processing volumes in early December. With 320 MMscfpd of natural gas processing capacity, OMP is the second largest natural gas processor in the Williston Basin. Utilization of Gas Plant II approximated 60% through the first three weeks of February. OMP expects to run at 60% utilization in the beginning of 2019, and with additional third party deals, utilization is now expected to increase to above 90% by year end 2019 (vs. over 80% at the November 2018 update). Third party volumes are expected to account for approximately 30% to 40% of Gas Plant II's throughput by the fourth quarter of 2019.

2019 Capital Spending and Outlook:

On February 22, 2019, OMP entered into a capital expenditures arrangement (the "Capital Expenditures Arrangement") with Oasis Petroleum. Pursuant to this arrangement, in exchange for increasing its percentage ownership interest in Bobcat DevCo, OMP will cover up to $80 million of the capital contributions that Oasis Petroleum would otherwise be required to contribute to Bobcat DevCo during the 2019 calendar year. The arrangement provides an opportunity for OMP to increase its scale in an accretive manner while lowering the capital requirements of its sponsor. Based on current market values, OMP's ownership interest in Bobcat DevCo is expected to increase from 25% as of December 31, 2018 to between approximately 34% and 36% by year end 2019. Increasing ownership in Bobcat DevCo is expected to drive EBITDA and coverage higher throughout 2019. Capital expenditures guidance and highlights for 2019 provided below includes the Capital Expenditures Arrangement for all of 2019.

The terms of the Capital Expenditures Arrangement were approved by the Board of Directors of OMP GP LLC (the "General Partner") following a unanimous recommendation for approval from the conflicts committee of the Board of Directors of the General Partner, which consists entirely of independent directors. The conflicts committee was advised by Baird on financial matters and Richards, Layton & Finger, P.A. on legal matters. Oasis Petroleum was advised by Vinson and Elkins L.L.P. on legal matters.

The following table depicts our full year 2019 guidance for capital expenditures ("CapEx"):









2019 CapEx

DevCo



OMP Ownership(1)



Gross



Net(2)









(In millions)

Bighorn DevCo



100%



$25 - 30



$25 - 30

Bobcat DevCo



30% - 31%



100 - 110



94 - 104

Beartooth DevCo



70%



17 - 22



12 - 15

Total CapEx







$142 - 162



$131 - 149

___________________

(1) OMP ownership reflects average estimated ownership during 2019.

(2) Net CapEx range reflects 100% of estimated expansion CapEx for Bobcat DevCo pursuant to the Capital Expenditures Arrangement. Maintenance CapEx remains split by ownership.

Highlights for 2019 include:

  • Growing distributions per unit approximately 5% each quarter — 20% annualized rate;
  • Expecting first quarter 2019 limited partner distribution coverage of approximately 1.5x and anticipate limited partner distribution coverage increasing to 1.8x - 2.0x as the year progresses;
  • Maintenance CapEx of approximately 6% to 8% of Adjusted EBITDA, which is included in total CapEx estimate;
  • Cash Interest of approximately $15 million in 2019; and
  • Adjusted EBITDA attributable to OMP of approximately $148 million to $157 million in 2019 (an increase from the November 2018 update primarily due to the Capital Expenditures Arrangement).

Operational and Financial Update

Select operational and financial statistics are in the following table:







Three Months Ended

December 31, 2018



Year Ended December 31,

2018



OMP

Ownership(1)



Gross



Net



Gross



Net







(In millions)

Bighorn DevCo



















Operating income

100%



$

6.0





$

6.0





$

22.1





$

22.1



Depreciation and amortization

100%



3.3





3.3





11.4





11.4



Total CapEx

100%



19.2





19.2





78.2





78.2



Bobcat DevCo



















Operating income

25%



$

19.9





$

3.4





$

74.3





$

8.9



Depreciation and amortization

25%



2.7





0.5





9.0





1.1



Total CapEx

25%



23.7





3.5





142.6





15.4



Beartooth DevCo



















Operating income

70%



$

15.1





$

8.2





$

55.3





$

24.3



Depreciation and amortization

70%



2.2





1.2





8.0





3.5



Total CapEx

70%



15.2





8.6





51.3





23.0



Total OMP



















DevCo operating income





$

40.9





$

17.6





$

151.7





$

55.4



Public company expenses





0.6





0.6





3.0





3.0



OMP operating income





40.3





17.0





148.8





52.4



Depreciation and amortization





8.2





5.0





28.4





16.0



Equity-based compensation expense





0.1





0.1





0.4





0.4



Total CapEx(2)





58.1





31.3





272.1





116.6



Maintenance CapEx





1.6





1.0





6.9





2.7



Expansion CapEx





56.5





30.3





265.1





113.8



___________________

(1) OMP ownership interest as of December 31, 2018. On November 19, 2018, OMP acquired an additional 15% ownership interest in Bobcat DevCo and an additional 30% ownership interest in Beartooth DevCo. Net amounts attributable to OMP were recorded prospectively from the closing date of the dropdown acquisition on November 19, 2018.

(2) Excludes expansion capital expenditures of approximately $172.4 million for the acquisition of additional ownership interests in Bobcat DevCo and Beartooth DevCo on November 19, 2018.

The following table shows gross volumes for the full year 2018, fourth quarter 2018 actuals compared to fourth quarter 2018 guidance, and depicts OMP's gross volumes guidance for the first quarter 2019 and full year 2019.



Metric



FY18

Actual



4Q18

Actual



4Q18

Guidance



1Q19

Guidance



FY19

Guidance

Bighorn DevCo























Crude oil service volumes

Mbopd



43.6



45.1



40 - 46



41 - 46



44 - 48

Natural gas service volumes

MMscfpd



102.8



113.0



125 - 140



160 - 190



200 - 240

Bobcat DevCo























Crude oil service volumes

Mbopd



36.1



36.9



35 - 40



37 - 40



38 - 42

Natural gas service volumes

MMscfpd



147.7



166.8



175 - 195



220 - 240



270 - 290

Water service volumes

Mbwpd



49.4



53.9



48 - 53



47 - 50



50 - 55

Beartooth DevCo























Water service volumes

Mbwpd



137.7



151.1



105 - 120



95 - 115



95 - 115

Liquidity and CapEx

As of December 31, 2018, OMP had cash and cash equivalents of $6.6 million and $318.0 million of borrowings outstanding under its revolving credit facility with an unused borrowing capacity of $82.0 million. OMP has the flexibility to expand the aggregate commitment amount under its revolving credit facility from $400 million to $600 million, subject to certain conditions. Expansion capital expenditures attributable to OMP during the fourth quarter of 2018 of $30.3 million, which excludes expansion capital expenditures of approximately $172.4 million for OMP's acquisition of additional ownership interests in Bobcat DevCo and Beartooth DevCo, were also in-line with expectations.

Quarterly Distribution

On February 5, 2019, the Board of Directors of the General Partner declared the quarterly distribution for the fourth quarter of 2018 of $0.45 per unit, a 20% increase from the fourth quarter of 2017 and 20% above the minimum quarterly distribution. In addition, the General Partner will receive a cash distribution of $0.1 million attributable to its incentive distribution rights related to earnings for the fourth quarter of 2018. These distributions will be paid on February 28, 2019 to unitholders of record as of February 15, 2019.

Qualified Notice

This release is intended to be a qualified notice under Treasury Regulation Section 1.1446-4(b). Brokers and nominees should treat one hundred percent (100.0%) of the Partnership's distributions to non-U.S. investors as being attributable to income that is effectively connected with a United States trade or business. Accordingly, the Partnership's distributions to non-U.S. investors are subject to federal income tax withholding at the highest applicable effective tax rate.

Conference Call Information

Investors, analysts and other interested parties are invited to listen to the webcast and call:

Date:



Wednesday, February 27, 2019

Time:



11:30 a.m. Central Time

Live Webcast:



https://www.webcaster4.com/Webcast/Page/1777/29263

Website:



www.oasismidstream.com

Sell-side analysts with a question may use the following dial-in:

Dial-in:



888-317-6003

Intl. Dial in:



412-317-6061

Conference ID:



5081699

A recording of the conference call will be available beginning at 1:30 p.m. Central Time on the day of the call and will be available until Wednesday, March 6, 2019 by dialing:

Replay dial-in:



877-344-7529

Intl. replay:



412-317-0088

Replay code:



10128591

The conference call will also be available for replay for approximately 30 days at www.oasismidstream.com.

Contact:

Oasis Midstream Partners LP

Bob Bakanauskas, (281) 404-9600

Director, Investor Relations

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Partnership expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include the expectations of plans, strategies, objectives and anticipated financial and operating results of the Partnership, including the Partnership's capital expenditure levels and other guidance included in this press release. These statements are based on certain assumptions made by the Partnership based on management's experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Partnership, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include, but are not limited to, the Partnership's ability to integrate acquisitions into its existing business, changes in crude oil and natural gas prices, weather and environmental conditions, the timing of planned capital expenditures, availability of acquisitions, uncertainties in the estimates of proved reserves and forecasted production results of the Partnership's customers, operational factors affecting the commencement or maintenance of producing wells, the condition of the capital markets generally, as well as the Partnership's ability to access them, the proximity to and capacity of transportation facilities, and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting the Partnership's business and other important factors. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, the Partnership's actual results and plans could differ materially from those expressed in any forward-looking statements.

Any forward-looking statement speaks only as of the date on which such statement is made and the Partnership undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

About Oasis Midstream Partners LP

Oasis Midstream Partners LP is a growth-oriented, fee-based master limited partnership formed by its sponsor, Oasis Petroleum Inc. to own, develop, operate and acquire a diversified portfolio of midstream assets in North America that are integral to the crude oil and natural gas operations of Oasis Petroleum Inc. and are strategically positioned to capture volumes from other producers. For more information, please visit the Partnership's website at www.oasismidstream.com.

OASIS MIDSTREAM PARTNERS LP

CONSOLIDATED BALANCE SHEETS

(Unaudited)





December 31, 2018



December 31, 2017



(In thousands)

ASSETS







Current assets







Cash and cash equivalents

$

6,649





$

883



Accounts receivable

2,481





834



Accounts receivable - Oasis Petroleum

80,805





85,818



Prepaid expenses

1,418





778



Other current assets

22







Total current assets

91,375





88,313



Property, plant and equipment

933,155





653,928



Less: accumulated depreciation and amortization

(62,730)





(34,348)



Total property, plant and equipment, net

870,425





619,580



Other assets

2,452





2,013



Total assets

$

964,252





$

709,906



LIABILITIES AND EQUITY







Current liabilities







Accounts payable

$

2,180





$



Accounts payable - Oasis Petroleum

33,014





11,638



Accrued liabilities

57,657





58,818



Accrued interest payable

442





114



Total current liabilities

93,293





70,570



Long-term debt

318,000





78,000



Asset retirement obligations

1,514





1,316



Total liabilities

412,807





149,886



Partners' Equity







Limited Partners







Common units (20,029 and 13,762 units issued and outstanding at December 31, 2018 and 2017, respectively)

192,581





167,401



Subordinated units (13,750 units issued and outstanding at December 31, 2018 and 2017)

45,937





79,173



General Partner

112







Total partners' equity

238,630





246,574



Non-controlling interests

312,815





313,446



Total equity

551,445





560,020



Total liabilities and equity

$

964,252





$

709,906



 

OASIS MIDSTREAM PARTNERS LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)





Three Months Ended December 31,



Year Ended December 31,



2018



2017



2018



2017



(In thousands, except per unit data)

Revenues















Midstream services – Oasis Petroleum

$

64,115





$

52,453





$

248,216





$

168,205



Midstream services – third parties

1,164





458





2,604





1,973



Product sales – Oasis Petroleum

6,884





3,620





17,476





11,644



Product sales – third parties

14





352





3,327





394



Total revenues

72,177





56,883





271,623





182,216



Operating expenses















Costs of product sales

1,968





1,874





7,433





6,085



Operating and maintenance

15,322





12,544





63,123





39,441



Depreciation and amortization

8,192





4,371





28,404





15,730



General and administrative

6,401





4,729





23,897





18,597



Total operating expenses

31,883





23,518





122,857





79,853



Operating Income

40,294





33,365





148,766





102,363



Other income (expense)















Interest expense, net of capitalized interest

(1,735)









(2,343)





(6,965)



Other income (expense)

1









(14)





7



Total other expense

(1,734)









(2,357)





(6,958)



Income before income taxes

38,560





33,365





146,409





95,405



Income tax expense













(22,858)



Net income

38,560





33,365





146,409





72,547



Less: Net income prior to initial public offering













37,577



Net income subsequent to initial public offering

38,560





33,365





146,409





34,970



Less: Net income attributable to non-controlling interests subsequent to initial public offering

23,279





22,253





96,354





23,332



Net income attributable to Oasis Midstream Partners LP

15,281





11,112





50,055





11,638



Less: Net income attributable to General Partner

112









112







Net income attributable to limited partners

$

15,169





$

11,112





$

49,943





$

11,638



Earnings per limited partner unit















Common units - Basic and diluted

$

0.54





$

0.41





$

1.82





$

0.43



Weighted average number of limited partners units outstanding















Common units - Basic

16,740





13,628





14,504





13,566



Common units - Diluted

16,751





13,630





14,519





13,568



Non-GAAP Financial Measures

Cash Interest

Cash Interest is a supplemental non-GAAP financial measure that is used by management and external users of the Partnership's financial statements, such as industry analysts, investors, lenders and rating agencies. The Partnership defines Cash Interest as interest expense plus capitalized interest less amortization of deferred financing costs included in interest expense. Cash Interest is not a measure of interest expense as determined by United States generally accepted accounting principles, or GAAP. Management believes that the presentation of Cash Interest provides useful additional information to investors and analysts for assessing the interest charges incurred on our debt, excluding non-cash amortization, and our ability to maintain compliance with our debt covenants.

The following table presents a reconciliation of the GAAP financial measure of interest expense, net of capitalized interest, to the non-GAAP financial measure of Cash Interest for the periods presented:



Three Months Ended

December 31,



Year Ended December 31,



2018



2017



2018



2017



(In thousands)

Interest expense, net of capitalized interest

$

1,735





$





$

2,343





$

6,965



Capitalized interest

965





562





4,870





1,220



Amortization of deferred financing costs

(164)





(119)





(525)





(126)



Cash Interest

$

2,536





$

443





$

6,688





$

8,059



Less: Cash Interest prior to the initial public offering













7,603



Cash Interest attributable to Oasis Midstream Partners LP

$

2,536





$

443





$

6,688





$

456



Adjusted EBITDA

Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of the Partnership's financial statements, such as industry analysts, investors, lenders and rating agencies. The Partnership defines Adjusted EBITDA as earnings before interest expense (net of capitalized interest), income taxes, depreciation, amortization, equity-based compensation expenses and other similar non-cash adjustments. Adjusted EBITDA should not be considered an alternative to net income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Management believes that the presentation of Adjusted EBITDA provides information useful to investors and analysts for assessing the Partnership's results of operations, financial performance and its ability to generate cash from its business operations without regard to its financing methods or capital structure, coupled with the Partnership's ability to maintain compliance with its debt covenants. The GAAP measures most directly comparable to Adjusted EBITDA are net income and net cash provided by operating activities.

Distributable Cash Flow ("DCF")

DCF is a supplemental non-GAAP financial measure that is used by management and external users of the Partnership's financial statements, such as industry analysts, investors, lenders and rating agencies. The Partnership defines DCF as Adjusted EBITDA attributable to the Partnership less Cash Interest and maintenance capital expenditures attributable to the Partnership. Maintenance capital expenditures are cash expenditures (including expenditures for the construction or development of new capital assets or the replacement, improvement or expansion of existing capital assets) made to maintain, over the long term, system operating capacity, operating income or revenue. DCF should not be considered an alternative to net income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Management believes that the presentation of DCF provides information useful to investors and analysts for assessing the Partnership's results of operations, financial performance and ability to generate cash from its business operations without regard to its financing methods or capital structure, coupled with the Partnerships ability to make distributions to its unitholders. The GAAP measures most directly comparable to DCF are net income and net cash provided by operating activities.

The following table presents reconciliations of the GAAP financial measures of net income and net cash provided by operating activities to the non-GAAP financial measures of Adjusted EBITDA and DCF for the periods presented:



Three Months Ended

December 31,



Year Ended December 31,



2018



2017



2018



2017



(In thousands)

Net income

$

38,560





$

33,365





$

146,409





$

72,547



Income tax expense













22,858



Depreciation and amortization

8,192





4,371





28,404





15,730



Equity-based compensation expenses

76





53





356





1,052



Interest expense, net of capitalized interest

1,735









2,343





6,965



Adjusted EBITDA

48,563





37,789





177,512





119,152



Less: Adjusted EBITDA prior to the initial public offering













79,484



Adjusted EBITDA subsequent to the initial public offering

48,563





37,789





177,512





39,668



Less: Adjusted EBITDA attributable to non-controlling interests

26,504





24,740





108,754





25,955



Adjusted EBITDA attributable to Oasis Midstream Partners LP

22,059





13,049





68,758





13,713



Cash Interest attributable to Oasis Midstream Partners LP

2,536





443





6,688





456



Maintenance capital expenditures

1,036





1,098





2,747





1,183



Distributable Cash Flow attributable to Oasis Midstream Partners LP

$

18,487





$

11,508





$

59,323





$

12,074



















Net cash provided by operating activities

$

48,112





$

8,274





$

205,012





$

79,843



Current tax expense













17,618



Interest expense, net of capitalized interest

1,735









2,343





6,965



Changes in working capital

(2,038)





29,635





(30,362)





14,853



Other non-cash adjustments

754





(120)





519





(127)



Adjusted EBITDA

48,563





37,789





177,512





119,152



Less: Adjusted EBITDA prior to the initial public offering













79,484



Adjusted EBITDA subsequent to the initial public offering

48,563





37,789





177,512





39,668



Less: Adjusted EBITDA attributable to non-controlling interests

26,504





24,740





108,754





25,955



Adjusted EBITDA attributable to Oasis Midstream Partners LP

22,059





13,049





68,758





13,713



Cash Interest attributable to Oasis Midstream Partners LP

2,536





443





6,688





456



Maintenance capital expenditures

1,036





1,098





2,747





1,183



Distributable Cash Flow attributable to Oasis Midstream Partners LP

$

18,487





$

11,508





$

59,323





$

12,074



















Distributions Declared















Limited partners

$

15,208





$

10,317





$

49,135





$

10,991



Incentive distribution rights

112









112







Total distributions

$

15,320





$

10,317





$

49,247





$

10,991



















DCF coverage ratio

1.21x





1.12x





1.20x





1.10x



 

Cision View original content:http://www.prnewswire.com/news-releases/oasis-midstream-partners-lp-announces-year-ended-december-31-2018-earnings-300802737.html

SOURCE Oasis Midstream Partners LP

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